Historically, investors tend to do the wrong things at the wrong times. As a result, an investor’s behavior is one of the key drivers of long-term investment performance.
Consider this example: In 2009, in the middle of the worst stock market downturn since the Great Depression, investors fled the stock markets in search of safety. As the market hit bottom in March 2009, investors that month were busy pulling $25 billion out of stock funds. Unfortunately, many of those investors missed out on the subsequent stock market rebound in 2009, when the S&P 500 index ended the year up 37%.
Indeed, many investors sabotage their long-term investment results due to poor decision making. During the 20 years through 2011, the average equity investor’s portfolio returned 3.49% a year. That compares to a nearly 8% annual return for the S&P 500 Index. A significant reason for that underperformance is investors’ tendencies to sell at market bottoms and buy at market highs.
At Strathmore Capital Advisors, we believe there’s a valuable lesson to be learned from the mistakes of the average investor. Instead of basing crucial investment decisions on short-term market developments, we work with our clients to build and maintain a disciplined long-term investment strategy that can survive the ups and downs of the market. It’s this all-weather approach to investing that we believe offers investors the best foundation for pursuing their most important financial goals.